Gaming revenue growth slows in 2006 amid fewer facility openings 6-28-07

- Indian gaming revenue grew 11 percent in 2006 to about $25.5 billion (euro18.94 billion), slower than the average annual pace of 15 percent in the past decade, as fewer facilities opened, a report Thursday showed.

Gambling enterprises on tribal lands employed about 327,000 people, led to about $80.7 billion (euro59.92 billion) in output to the U.S. economy and generated $11.7 billion (euro8.69 billion) in taxes, according to the Indian Gaming Industry Report by Alan Meister, an economist with the Analysis Group consulting firm in Los Angeles.

“Yes, growth is down, but don't be fooled,” Meister said in a telephone interview. “Indian gaming has a lot of growth potential.”

Indian gaming is intended by law to build and sustain self-sufficient tribal governments, and experts say it generally has met its goal, though some tribes have benefited more than others. A total of 228 tribes use gaming revenues to fund tribal governments and support social services such as health care, housing and education. About 34 percent of tribes distribute direct payments to tribal members, the report showed.

As sovereign governments, tribes do not pay corporate income taxes on tribal revenue or property tax on reservation land. Tribal members who live and work on reservations do not pay state income or property taxes, or sales taxes on purchases made on Indian lands. However, tax revenues are generated from secondary economic activity after initial spending at gaming facilities is redistributed throughout the economy.

Last year's revenue growth rate is the lowest since 1988, when the Indian Gaming Regulatory Act was passed, the report showed. The total number of Indian gaming facilities - 423 - increased by just one in 2006, compared with an increase of 10 in 2005. There's also more competition from non-Indian gambling and racetracks with slot machines.

Twenty of the 28 Indian gaming states had lower growth rates in 2006 compared with the year before, with California the most notable of those.

While it led all states by a wide margin with more than $7.7 billion (euro5.72 billion) in revenues last year, California's 10 percent growth rate was half of what it was in 2005 - though it still accounts for more than 30 percent of the total Indian gaming revenue, the report showed.

Other states with lower growth rates in 2006 compared with the year before were second-ranked Connecticut, No. 4 Oklahoma and No. 5 Florida.

Still, every Indian gaming state reported some growth, except for Louisiana, which saw revenues drop from about $402 million (euro298.51 million) to $395 million (euro293.31 million).

A handful of new facilities are being developed by tribes in Michigan, New York, Washington and Wyoming. Many more tribes have planned or proposed facilities that are awaiting federal recognition or an agreement with their states to allow new or expanded gambling.

The relatively strong performance of Indian gaming corresponds with the popularity of gambling in general over the past 60 years - though future success is not guaranteed, said David Schwartz, a gambling expert with the Center for Gaming Research at the University of Nevada at Las Vegas.

“Gambling is a consumer behavior, which is never going to be constant,” Schwartz said. “People are always changing where they gamble, how they gamble.”

In 2006, Indian gaming generated 42 percent of all U.S. casino gaming revenue, the report showed. Nationally, commercial non-Indian casino gaming grew about 7 percent, from $29.6 billion (euro21.98 billion) in 2005 to $31.7 billion (euro23.54 billion) in 2006, the report showed.

The report, which was paid for by Analysis Group and is sold by Casino City Press, was compiled from public and private sources and well-established models used to estimate gaming revenues.